Financial Models

ABSTRACT Purpose ‐ The purpose of this exploratory paper is to examine the lack of reliability of traditional neo-classical models and to argue that it is due to the hidden complexity and non-linearity that may operate at times in residential housing markets. As a result, market efficiency may be a special case, rather than the prevailing rule. An alternative framework that incorporates the higher order concepts of complexity ‐ based on the non-linear, emergent behavior of multiple agents ‐ is required to model discontinuities and imbalances in the housing markets. Design/methodology/approach ‐ The paper examines the building block concepts required to model the complexity of the housing market and analyzes their implications. These implications can be counter-intuitive and help explain the failure of policy makers to model the recent bust in global housing markets. Findings ‐ The paper finds that policy makers need to adopt an analytical framework that incorporates non-linearity, emergence and other building blocks of complexity in order to construct representative financial models that help understand systemic imbalances that may afflict residential housing markets. Originality/value ‐ This is the first paper to one's knowledge that argues that policy makers should adopt an alternative theoretical framework based on complexity concepts in order to create more effective financial models; such models should include indicators that provide early warning signals of potential discontinuities in housing markets.

Abstract: In this paper we provide the analysis for an e-finance platform and propose a design solution using state-of-the-art models in finance and parallel processing. The problem that we address lays in the context of financial markets that are rapidly changing ...

Firm valuation has been an important domain of interest for finance. However, most financial models do not include customer-related metrics in this process. Studies in marketing have found that one particular customer metric, customer satisfaction, improves the ability to predict future cash flows, long-term financial measures, stock performance, and shareholder value. However, most of these studies predominantly employ models that are not directly used in finance practice. This article extends existing literature by examining the impact of customer satisfaction on firm valuation by employing multiples and risk-adjusted abnormal return models borrowed directly from the practice of finance. Data include 3600 firm-quarter observations from the American Customer Satisfaction Index, COMPUSTAT, and Center for Research in Securities Prices databases from 1996 to 2006. The results indicate that a portfolio of stocks consisting of firms with high levels and positive changes in customer sati...

The Sub-prime Mortgage credit crisis has led to a major downturn in virtually all financial sectors and consequently the real estate sector received the brunt of the 2008–2009 financial crisis. However, this downturn undoubtedly has provided an opportunity to ...